CBA Record July-August 2025

lawyer’s estate pursuant to a fee-sharing or retirement agree ment over a reasonable period of time. l Purchase of a law practice: A lawyer buying a practice under Rule 1.17 may pay the estate or representative of a deceased, disabled, or disappeared lawyer. l Employee profit-sharing: Firms may include non-lawyer staff in compensation or retirement plans based in whole or in part on profit-sharing. l Court-awarded fees: Lawyers may share court-awarded fees with nonprofit organizations that employed or recommended the lawyer in the matter (e.g., the Chicago Bar Association’s lawyer referral service). These exceptions are narrow and purpose driven. They aim to accommodate practical realities—such as succession planning and employee incentives—while preventing nonlawyers from exerting control over legal services. Sprawling Reach of Fee-Sharing Issues The fee-sharing ban doesn’t just apply to formal agreements. It reverberates through related legal and business contexts—some times in unexpected ways. Litigation funding is one such area. While client-side fund ing is generally permissible, law firm financing models that tie returns to legal fees (e.g., “a multiple of funds advanced”) may veer into prohibited territory if they result in nonlawyers receiv ing a portion of firm revenues. Lead generation services can pose similar issues. While lawyers can ethically pay for advertising or client leads, they cannot pay a marketer a percentage of fees earned—unless they’re in Arizona.

This distinction is critical in personal injury, mass tort, and other high-volume practices, where external intake and marketing sup port are common (and such models are becoming increasingly common). Co-counseling with nonlawyer-owned firms adds another layer of complexity. Under Rule 1.5(e), lawyers may divide fees with other lawyers outside their firm, but what if the other “firm” is owned by nonlawyers or shares profits with them? Ethics opin ions in Florida, Georgia, New York, Pennsylvania, and ABA Formal Opinion 464 generally approve such arrangements as long as the lawyer’s own conduct remains within ethical bounds. However, Maryland authorities have expressed hesitation. Cali fornia is currently considering legislation banning such practices. Ongoing Prospects for Reform The prohibition on fee-sharing with nonlawyers may no longer be as immutable as once thought. In 2021, Arizona became the first state to formally repeal Rule 5.4, allowing nonlawyer owner ship and alternative business structures. Utah has launched a reg ulatory “sandbox” to test similar models. Other jurisdictions have begun studying the issue. Meanwhile, the Association of Profes sional Responsibility Lawyers, the national legal ethics bar asso ciation, has proposed replacing Rule 5.4 with a new framework focused on outcomes and client protection rather than ownership structures or bright-line bans. Whether these efforts will gain traction remains to be seen. But one thing is clear: The traditional boundaries between law and business are blurring. Lawyers must stay informed to navi gate both ethical risks and emerging opportunities.

Actuarial Pension Valuations • All Illinois Public Retirement Plans • Private Plans • Military and Federal (CSRS/FERS) • Non-Qualified Plans • Survivor Benefits • QILDRO Income Stream Estimates

John C. Madden (925) 258-7100

www.msmqdros.com info@msmqdros.com

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